2019 (3) TMI 783 - AT - Central Excise

Refund claim - duty paid under protest - unjust enrichment - Held that - The test of unjust enrichment, in its limited applicability, is confined to the consideration as to who had borne to the incidence of tax? If it is borne by the appellant and not passed on to any other person- say customer, appellant cannot be regarded as being enriched with refund of such tax component borne by other person - In the instant case, appellant had not only made declaration in writing in advance way back in 2006, that it would not pass the incidence of tax to the customers but also had produced invoice copies as well as Chartered Accountant certificate to establish that MRP of the product remained unchanged and the incidence of tax has been shown as receivable in the Balance Sheet. Without taking into account the evidenciary value of the additional evidence like Chartered Accountant certificate, invoice copies, appellant s own declaration made before- hand, he just gave his opinion that those documents were not sufficient proof. The observation appears to be arbitrary as nothing is forthcoming from his order as to why he disbelieved those documentary evidence or rejected those as insufficient. In a judicial proceeding, order has to be a reasoned one based on judicial analysis where whim and caprice have got no role to play. Refund allowed - appeal allowed - decided in favor of appellant.

Issues:
1. Rejection of refund claim based on unjust enrichment.
2. Classification dispute regarding food products.
3. Burden of proof on appellant to show non-passing of duty incidence.
4. Application of Section 11B of the Central Excise Act, 1944.
5. Interpretation of the doctrine of unjust enrichment.
6. Evaluation of evidence and Chartered Accountant certificate.
7. Judicial reasoning and analysis in refund cases.

Issue 1: Rejection of refund claim based on unjust enrichment
The dispute in this case reached the appellate stage due to the rejection of a refund claim on the grounds of unjust enrichment. The appellant, a manufacturer of food products, sought a refund of excise duty paid 'under protest' after a favorable order from CESTAT confirmed the classification of the products under a duty-exempt category. However, the refund was granted but directed to be deposited in the Consumer Welfare Account, as the appellant failed to provide concrete evidence that the duty incidence was not passed on to the buyer.

Issue 2: Classification dispute regarding food products
The appellant's food products were initially classified by the department under a category that denied them exemption benefits. After challenging this classification, the CESTAT confirmed a different classification that made the products exempt from duty. The department's unsuccessful challenge before the Supreme Court solidified the finality of this classification, leading to the appellant's refund claim.

Issue 3: Burden of proof on appellant to show non-passing of duty incidence
During the appeal process, the appellant presented evidence, including a letter stating payment was made under protest, invoices showing non-recovery of excise duty, and a Chartered Accountant certificate indicating the burden of excess duty was not passed on. The appellant argued that since the payment was not towards discharging duty liability, Section 11B of the Central Excise Act, 1944 should not apply.

Issue 4: Application of Section 11B of the Central Excise Act, 1944
The appellant contended that Section 11B should not apply since the payment was made under protest and the duty incidence was absorbed by them. The appellant relied on various legal decisions to support their argument and challenge the order passed by the Commissioner (Appeals).

Issue 5: Interpretation of the doctrine of unjust enrichment
The Tribunal evaluated the doctrine of unjust enrichment, emphasizing that it hinges on determining who bore the tax burden. In this case, the appellant demonstrated through declarations, invoices, and a Chartered Accountant certificate that they did not pass the tax burden to customers. The Tribunal highlighted the importance of evidence and the appellant's proactive measures to establish non-enrichment through tax refund.

Issue 6: Evaluation of evidence and Chartered Accountant certificate
The Tribunal scrutinized the evidence presented by both parties, emphasizing the significance of the Chartered Accountant certificate and other documentary proof provided by the appellant. The Tribunal criticized the Commissioner (Appeals) for not providing a reasoned analysis for rejecting the evidence and failing to consider the evidentiary value of the documents presented.

Issue 7: Judicial reasoning and analysis in refund cases
The Tribunal emphasized the necessity of a reasoned and judicially sound analysis in refund cases, highlighting the arbitrary nature of the Commissioner (Appeals)'s decision. The Tribunal overturned the order, stating that the appellant had passed the test of unjust enrichment, and directed the respondent-department to refund the claimed amount along with applicable interest within a specified timeframe.

This detailed analysis of the judgment highlights the key legal issues, arguments presented by both parties, and the Tribunal's reasoning in reaching the decision to allow the appeal and grant the refund claim.

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